How to apply for a temporary discharge of a federal IRS tax lien so you can close your Sacramento short sale....

While short sales are definitely a much smaller part of the Sacramento real estate market now than they were a few years ago, I am still doing plenty of them. And something that seems to be pretty common, that is seldom discussed, is the fact that many of the folks facing financial hardship also have unpaid income taxes. The IRS may place a Federal Tax Lien on you and your property if you have unpaid income taxes. This can be an issue if you need to sell a home because those liens need to either be paid in full or released before a sale can close. Luckily, there is a process to temporarily discharge tax liens so that a home can be sold.

The IRS wants quite a bit of documentation, packaged up in a certain way, and it can't be submitted until several other milestones in the short sale process have been reached.

I have done this for several of my transactions and it is definitely within my area of expertise. There is not a separate fee for my services to do this, and it is a part of services when I negotiate short sales for my seller clients.

The sellers will need to complete and sign IRS Form 14135 (Application for Certificate of Discharge of Property for Federal Tax Lien), and IRS Form 8821 (Tax Information Authorization) which provides permission for a real estate agent to talk to the IRS on the seller's behalf. Form 14135 outlines in detail the supporting documentation that needs to be sent in with the application. The list of items includes a description of the property, a copy of the deed for the home, a formal appraisal of the home, county valuation of the home, a copy of the formal tax lien as filed with the county, a purchase contract to sell the property, preliminary title report, short sale approvals, an estimated closing statement, and other supporting information as necessary.

An experienced real estate agent will be able to gather all of these documents and assemble the package for submission. If you are selling a home I would not suggest trying to complete this process yourself. It can be complicated. Even just filling out the forms correctly can be a daunting task if you haven't done it before.

When it is time to submit documents to the IRS, you will need to FedEx everything to them at once. For northern California properties, you will need to send everything to the IRS offices in Oakland. In the photo above, all of those documents amounted to about 160 pages, not including the real estate transaction or the short sale negotiation itself. You will need to track the package and find out who the file is ultimately assigned to. Then...follow up! This is not a difficult process but there are several nuances involved. I have closed several of these transactions. If you have questions or are in this situation, I welcome your call.

Ditch that old Toilet for one that conserves water...

Did you know that the State of California offers a rebate program for replacing old toilets with water conserving units? They do! The California Department of Water Resources will rebate up to $100 per household for the purchase and installation of one qualified "high-efficiency" toilet (aka, one that flushes 1.28 gallons or less). To qualify for the rebate, a homeowner must replace a low-efficiency toilet (aka, one that flushes more than 1.6 gallons). There are hundreds of different toilets that qualify as high-efficiency in many different styles.

There is limited funding for this rebate program, however it still has a couple million dollars available! To get started, visit the "Save Our Water Rebates" website. There is a brief online application and FAQ section...this is a nice way to modernize your bathroom and to help save water! Or at least get rid of that man-eating toilet.

New Listing - 5.83ac Commercial & Multi-Residential Land in Sacramento

Developers, here is the project you have been looking for. Located in a busy area hub with frontage and high visibility on Florin Road. Close to light rail station, schools, shopping, restaurants, and residential areas. Listing includes 8 parcels, 041-083-001, -002, -003, -004, and 041-086-028, -029, -030, -031; total size is approximately 5.83ac with individual lots varying from .68ac - .74ac. C2, C2-TO (Commercial), RMX, and RMX-TO (Multi-Residential) zoning. Billboard located on property brings income. Don't wait! Offered at $830,000, and recent appraisal available. For more photos and information please visit Florin Road Land 95822.

Think twice before financing home improvements using a Property Assessed Clean Energy (PACE) Loan...

A few weeks ago I listed a really cute home in the Tallac Village neighborhood. The sellers walked me through the house and showed me around. I took note of the dual pane windows, updated kitchen, central heating and air, drought tolerant landscape, composition roof, and all the other nice amenities the house had to offer. Then I asked the million dollar question: "have you financed any of these improvements?" The seller had indeed financed the new artificial grass using a Property Assessed Clean Energy (PACE) loan. Yikes. Alarm bells were ringing in my head.

She then said, "Oh, but don't worry. The PACE loan will be transferred to the new owner!"

Umm, no.

A PACE loan allows a homeowner who meets the eligibility requirements to finance energy-efficient home improvements, and make payments via the twice yearly property tax billing. Examples of the types of work that can be done to a home are solar, central heating and air, dual pane windows, lighting, a roof, low-water-flow plumbing, insulation, artificial turf, etc.

Let me just say that I have some negative thoughts about PACE loans. There is a lot of room for confusion among homeowners who use this program. This is the perfect case in point.

While in theory, a homeowner may transfer a PACE loan to a buyer, there are two big-time flaws in this concept.

First, what homeowner wants to pay the market value for a home and assume a loan for part of the improvements that made the home worth that amount of money? Nobody. That's a raw deal. Let's just assume for a minute that the $7,000 that the seller of this property financed to pay for artificial turf (yes, that's right $7,000) increased the home's value by even half that amount: $3,500. The house may have been worth $271,500, and the market value is worth maybe $275,000 now after adding the value of artificial turf. Why would a buyer pay $275,000 AND assume a $7,000 loan? No buyer in his/her right mind would do that. (And for the record, I do not think this sort of improvement actually increases a home's actual value that significantly)

Second, and where the real trouble lies, is that lenders will not place new loans on properties with existing PACE loans. Fannie Mae, Freddie Mac, and FHA all consider PACE loans to be "superior" liens. Fannie, Freddie, and FHA will not put a loan on a property and be in the "second position" to ANY loan. Including a PACE loan. PACE loans, because they are attached to a property tax bill, survive foreclosure. A regular second mortgage or Home Equity Line of Credit will not survive a foreclosure.

So while the PACE loan administrator (a company called Ygrene in Sacramento) may allow the transfer of this debt to a new owner, this is highly unlikely to happen unless you happen to sell the house to a poorly advised, all cash buyer. And that ain't happening.

So what does this mean for homeowners? It means if you have a PACE loan, it's going to have to be paid off when you sell. AND, it will have to be paid off if you refinance. Bet that wasn't made clear to you by the contractors pushing this financing for services they were trying to sell you, was it? It wasn't to my seller. And thankfully, we had this conversation early in the selling process, and they have more than enough equity to pay it off with the sale.

Let me share one other anecdote from personal experience as well. I am in the process of re-roofing my own home. My husband and I got five bids, and one of the contractors was trying to sell us on using PACE to pay for the roof and how it was like getting "free money" since we could pay for it over 10-15 years and via the property tax bill. That company's bid was THE HIGHEST, and the highest by about $7,000. Wow. A $20,000 bid, for a roof we are paying $11,000 for is insane. And I would argue that a lot of folks will overpay and not question a contractor's bid when they are financing the cost it over 10-15 years in this "free money" scam. Food for thought.

My advice? Stay away from PACE loans. Or at least be sure to read the fine print and really know what you are getting.

New Listing - 2740 Maison Way, Sacramento, CA 95864

Arden-area fixer is ready for a new owner. Well-loved by the same owner for many years, this property is a great project for a cash buyer with lots of vision, who can appreciate the blank canvas that it offers for a much-needed renovation to fix & add your own style. You will love the location, some items are already updated; the kitchen has newer cabinets and counters, updated bathroom w/walk-in bath tub, dual pane windows, circular driveway, composition roof. 2243sf under roof! Don't wait! Offered at $199,000. For more information visit 2740 Maison Way, Sacramento, CA 95864.